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AS INTRODUCED IN LOK SABHA

Bill No. 16 of 2017

THE SPECIFIED BANK NOTES (CESSATION OF LIABILITIES)

BILL, 2017
A

BILL
to provide in the public interest for the cessation of liabilities on the specified bank
notes and for matters connected therewith or incidental thereto.
BE it enacted by Parliament in the Sixty-eighth Year of the Republic of India as
follows:
1. (1) This Act may be called the Specified Bank Notes (Cessation of Liabilities) Short title and
Act, 2017. commencement.

5 (2) It shall be deemed to have come into force on the 31st day of December, 2016.
2. (1) In this Act, unless the context otherwise requires,
(a) "appointed day" means the 31st day of December, 2016;
(b) "grace period" means the period to be specified by the Central Government,
by notification, during which the specified bank notes can be deposited in accordance
10 with this Act;
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(c) "notification" means a notification published in the Official Gazette;

(d) "Reserve Bank" means the Reserve Bank of India constituted by the Central
Government under section 3 of the Reserve Bank of India Act, 1934; 2 of 1934.

(e) "specified bank note" means a bank note of the denominational value of
five hundred rupees or one thousand rupees of the series existing on or before the 5
8th day of November, 2016.
(2) The words and expressions used and not defined in this Act but defined in the
Reserve Bank of India Act, 1934 or the Banking Regulation Act, 1949 shall have the 2 of 1934.
meanings respectively assigned to them in those Acts. 10 of 1949.

Specified bank 3. On and from the appointed day, notwithstanding anything contained in the Reserve 10
notes to cease Bank of India Act, 1934 or any other law for the time being in force, the specified bank 2 of 1934.
to be liability
of Reserve notes which have ceased to be legal tender, in view of the notification of the Government of
Bank or India in the Ministry of Finance, number S.O. 3407 (E), dated the 8th November, 2016,
Central issued under sub-section (2) of section 26 of the Reserve Bank of India Act, 1934, shall
Government. cease to be liabilities of the Reserve Bank under section 34 and shall cease to have the 15
guarantee of the Central Government under sub-section (1) of section 26 of the said Act.
Exchange of 4. (1) Notwithstanding anything contained in section 3, the following persons holding
specified bank specified bank notes on or before the 8th day of November, 2016 shall be entitled to tender
notes.
within the grace period with such declarations or statements, at such offices of the Reserve
Bank or in such other manner as may be specified by it, namely: 20

(i) a citizen of India who makes a declaration that he was outside India between
the 9th November, 2016 to 30th December, 2016, subject to such conditions as may
be specified, by notification, by the Central Government; or
(ii) such class of persons and for such reasons as may be specified by
notification, by the Central Government. 25

(2) The Reserve Bank may, if satisfied, after making such verifications as it may
consider necessary that the reasons for failure to deposit the notes within the period specified
in the notification referred to in section 3, are genuine, credit the value of the notes in his
Know Your Customer compliant bank account in such manner as may be specified by it.
(3) Any person, aggrieved by the refusal of the Reserve Bank to credit the value of 30
the notes under sub-section (2), may make a representation to the Central Board of the
Reserve Bank within fourteen days of the communication of such refusal to him.
Explanation.For the purposes of this section, the expression "Know Your Customer
compliant bank account" means the account which complies with the conditions specified in
the regulations made by the Reserve Bank under the Banking Regulation Act, 1949. 3 5 10 of 1949.

Prohibition on 5. On and from the appointed day, no person shall, knowingly or voluntarily, hold,
holding transfer or receive any specified bank note:
transferring or
receiving Provided that nothing contained in this section shall prohibit the holding of specified
specified bank bank notes
notes.
(a) by any person 40

(i) up to the expiry of the grace period; or

(ii) after the expiry of the grace period,
(A) not more than ten notes in total, irrespective of the denomination;
or
(B) not more than twenty-five notes for the purposes of study, 45
research or numismatics;
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(b) by the Reserve Bank or its agencies, or any other person authorised by the
Reserve Bank;
(c) by any person on the direction of a court in relation to any case pending in
the court.
5 6. Whoever knowingly and wilfully makes any declaration or statement specified Penalty for
under sub-section (1) of section 4, which is false in material particulars, or omits to make a contravention
of section 4.
material statement, or makes a statement which he does not believe to be true, shall be
punishable with fine which may extend to fifty thousand rupees or five times the amount of
the face value of the specified bank notes tendered, whichever is higher.
10 7. Whoever contravenes the provisions of section 5 shall be punishable with fine Penalty for
which may extend to ten thousand rupees or five times the amount of the face value of the contravention
of section 5.
specified bank notes involved in the contravention, whichever is higher.
8. (1) Where a person committing a contravention or default referred to in section 6 Offences by
or section 7 is a company, every person who, at the time the contravention or default was companies.
15 committed, was in charge of, and was responsible to, the company for the conduct of the
business of the company, as well as the company, shall be deemed to be guilty of the
contravention or default and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable
to punishment if he proves that the contravention or default was committed without his
20 knowledge or that he had exercised all due diligence to prevent the contravention or default.
(2) Notwithstanding anything contained in sub-section (1), where an offence under
this Act has been committed by a company and it is proved that the same was committed
with the consent or connivance of, or is attributable to any neglect on the part of, any
director, manager, secretary, or other officer or employee of the company, such director,
25 manager, secretary, other officer or employee shall also be deemed to be guilty of the
offence and shall be liable to be proceeded against and punished accordingly.
Explanation.For the purpose of this section,
(a) "a company" means any body corporate and includes a firm, a trust, a co-
operative society and other association of individuals;
30 (b) "director", in relation to a firm or trust, means a partner in the firm or a
beneficiary in the trust.
9. Notwithstanding anything contained in section 29 of the Code of Criminal Special
2 of 1974. Procedure, 1973, the court of a Magistrate of the First Class or the court of a Metropolitan provisions
relating to
Magistrate may impose a fine, for contravention of the provisions of this Act. offences.

35 10. No suit, prosecution or other legal proceeding shall lie against the Government, Protection of
the Reserve Bank or any of their officers for anything done or intended to be done in good action taken in
good faith.
faith under this Act.
11. (1) The Central Government may, by notification, make rules for carrying out Power to make
the provisions of this Act. rules.

40 (2) Every rule made under this Act shall be laid, as soon as may be after it is made,
before each House of Parliament while it is in session for a total period of thirty days which
may be comprised in one session or in two or more successive sessions, and if, before the
expiry of the session immediately following the session or the successive sessions aforesaid,
both Houses agree in making any modification in the rule or both Houses agree that the rule
45 should not be made, the rule shall thereafter have effect only in such modified form or be of
no effect, as the case may be; so however, that any such modification or annulment shall be
without prejudice to the validity of anything previously done under that rule.
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Power to 12. (1) If any difficulty arises in giving effect to the provisions of this Act, the Central
remove Government may, by order published in the Official Gazette, make such provisions not
difficulties.
inconsistent with the provisions of this Act, as may appear to it to be necessary or expedient
for removing the difficulty:
Provided that no such order shall be made under this section after the expiry of a 5
period of two years from the date of commencement of this Act.
(2) Every order made under this section shall, as soon as may be after it is made, be
laid before each House of Parliament.
Repeal and 13. (1) The Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016 is hereby Ord. 10 of
savings. repealed. 1 0 2016.

(2) Notwithstanding such repeal, anything done or any action taken under the said
Ordinance shall be deemed to have been done or taken under the corresponding provisions
of this Act.
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STATEMENT OF OBJECTS AND REASONS

In order to eliminate the unaccounted money and fake Indian currency notes from the
financial system, the Government, on the recommendations of the Central Board of the
Reserve Bank, vide its notification number S.O. 3407(E), dated the 8th November, 2016,
declared that the existing series of the bank notes of the denominational value of five hundred
rupees and one thousand rupees as not legal tender with effect from the 9th November, 2016
to the extent specified in the said notification.
2. Subsequent to the issuance of the aforesaid notification, it was felt necessary to
provide clarity and finality on the following issues
(a) sub-section (1) of section 34 of the Reserve Bank of India Act, 1934 provides
that the liabilities of the Reserve Bank shall be an amount equal to the total of the
amount of the currency notes of the Government of India and bank notes for the time
being in circulation. Since the Reserve Bank cannot discharge its liabilities on its own
for such notes, it necessary by law to discharge such liabilities;
(b) sub-section (1) of section 26 of the Reserve Bank of India Act, 1934 provides
that every bank note shall be guaranteed by the Central Government. Though the legal
tender character of the Specified Bank Notes has ceased by the aforesaid notification
issued by the Government of India, it is necessary by law to withdraw the said guarantee;
and
(c) there is possibility of running in a parallel economy by unscrupulous elements
with Specified Bank Notes unless the possession of such note is declared illegal.
3. In view of the above, it was necessary to bring a legislation on Specified Bank
Notes. As Parliament was not in session and an urgent legislation was required to be made,
the President promulgated the Specified Bank Notes (Cessation of Liabilities) Ordinance,
2016 (Ord. 10 of 2016) on 31st December, 2016 for cessation of liabilities in the Specified
Bank Notes.
4. The Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016, inter alia,
provides the following, namely:
(a) to provide that the specified bank notes which have ceased to be legal tender
shall cease to be liability of the Reserve Bank of India and the Central Government;
(b) to provide that a citizen of India (who makes a declaration that he was
outside India between 9th November to 30th December, 2016) holding specified bank
notes on or before the 8th November, 2016 shall be entitled to tender within the grace
period with such declarations or statements, at such offices of the Reserve Bank or in
such other manner as may be specified by it;
(c) to prohibit the holding, transferring or receiving of the Specified Bank Notes
from the appointed day i.e. the 31st December, 2016;
(d) to impose penalty for contravention of provisions of the proposed Ordinance
and to confer power upon the court of a first class Magistrate to impose such penalty.
5. The Bill seeks to replace the aforesaid Ordinance.

NEW DELHI; ARUN JAITLEY

The 30th January, 2017.

5
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PRESIDENT'S RECOMMENDATION UNDER ARTICLE 117 OF

THE CONSTITUTION OF INDIA

[Copy of D.O. letter No. 10/01/2017-Cy. I dated 30 January, 2017 from

Shri Arun Jaitley, Minister of Finance to the Secretary General, Lok Sabha]

The President, having been informed of the subject matter of the proposed Specified
Bank Notes (Cessation of Liabilities) Bill, 2017, recommends the introduction and
consideration of the Bill in Lok Sabha under article 117 (1) and (3) of the Constitution of
India.

6
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FINANCIAL MEMORANDUM
Clause 3 of the Bill seeks to cease the liabilities of the Reserve Bank under section 34
of the Reserve Bank of India Act, 1934 and to cease guarantee of the Central Government
under sub-section (1) of section 26 of the said Act. The Bill thus involves a decision having
impact on the contigent liabilities of the Central Government and thus on the Consolidated
Fund of India.
2. No capital or recurring expenditure is involved.

7
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MEMORANDUM REGARDING DELEGATED LEGISLATION

Clause 11 of the Specified Bank Notes (Cessation of Liabilities) Bill, 2017 empowers
the Central Government to make rules for carrying out the provisions of the Act.
2. The matters in respect of which rules may be made under the aforesaid provisions
are matters of procedure and administrative detail and it is not practical to provide for them
in the Bill itself. The delegation of legislative power is, therefore, of a normal character.

8
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LOK SABHA

BILL
to provide in the public interest for the cessation of liabilities on the specified bank
notes and for matters connected therewith or incidental thereto.

(Shri Arun Jaitley, Minister of Finance)

GMGIPMRND4300LS(S3)31-01-2017.
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LOK SABHA
------

CORRIGENDA

to

THE SPECIFIED BANK NOTES (CESSATION OF LIABILITIES) BILL, 2017

[To be/As introduced in Lok Sabha]

1. Page 1, against Clause 2,-

insert the marginal heading Definitions

2. Page 7, line 5,-

for contigent liabilities

read contingent liabilities

3. Page 8, line 5,-

for practical to

read practicable to

NEW DELHI;
February 1, 2017______
Magha 12, 1938 (Saka)